The Economics of Terrorism

by Scott Horton

On my June 18 radio show [stream]
[download],
I interviewed Loretta Napoleoni, an economist, reporter, and novelist from Italy,
about the economics of terrorism, a subject she knows well. Her work for Italy's financial
papers goes back to the '70s and includes coverage of jihadists, the IRA, and
even interviews with leaders of the Italian Red Brigades. Her new book Terror
Incorporated: Tracing the Dollars Behind the Terror Networks is the result
of 10 years of investigation. It shows.

While
not ignoring religious, political, and ideological motivations, the book focuses
on the economics of modern terrorist groups. It tells how these groups emerged,
often spurred by various foreign incursions by the U.S. and U.S.S.R. during the
Cold War, and how they spun off from their former state masters, excelled at raising
money through criminal activity, and became amorphous, stateless bands of killers.
She calls it the "privatization of terrorism." It's not the phony
"privatization" by government contract that we're used to. Modern jihadist groups
are independent of the Middle Eastern states, and in many cases are even their
greatest enemies.

The black market is the jihadist's path to power. Though
not an apparent libertarian, Napoleoni details how government intervention in
the free exchange of goods has time and again helped jihadists flourish throughout
the world. For a terrorist group, she says, "heroin equals independence." This
began in the 1980s when America supported the mujahedin in Afghanistan through
Pakistan's Inter Services Intelligence (ISI). On the CIA's recommendation, Pakistan
convinced the mujahedin to levy high taxes on the land used by Afghan poppy farmers
in order to finance the resistance, which forced farmers to intensify opium production
enough to afford these tax increases. A smack-and-guns-dependent economy soon
replaced the formerly agrarian one, leaving what Napoleoni describes as a "state
shell." The "golden crescent" now supplies three-quarters
of the world's heroin.

After
the Soviet Union collapsed, the ISI, with U.S. approval, sent jihadists all around
central Asia to foment unrest in the former Soviet 'Stans and to facilitate their
break from Moscow. Heroin sales to European and American citizens paid the way.

The heroin market generates enough money to finance terrorist activities
only because it is illegal. As the risk involved grows unnaturally as a result
of government intervention, so too does the potential for profit.

The same
goes for oil. Where there are embargoes against trade, such as the sanctions maintained
against Iraq for 13 years, criminals gain, among them, in this case, the secretary-general
of the United Nations, Koch
Oil, and underground terrorist networks.

When the Soviet 'Stans gained
independence, the former Communist autocrats hardened their borders, which to
this day restrict locals from trading freely with their neighbors. Formerly prosperous
economies like that of the Fergana
Valley were destroyed, creating new havens for organized terrorist recruitment.
These crippled economies now depend mostly on Islamic banks that grew up to fill
this space where Western investors see too much risk.

This capital is used
to buy influence in a mirror image of how
the U.S. operates, but forcing religious doctrines instead of mercantilist ones.
Napoleoni quotes a Middle Eastern banker as telling her that, "they used finance
to colonize poor nations where Muslims lived. The material support granted to
the Muslim population in need was a means of imposing fundamentalist principles
upon Islamic society."

Much of this money is spent on recruiting potential
terrorists from a supply-heavy market of poor, desperate, and angry youth with
little to lose. This same process played out through the 1990s from Albania to
Indonesia, and is playing out in Iraq before our eyes.

So
Bush is right when he speaks of hopelessness causing terrorism. He, of course,
lost any points gained by that insight when he took the advice of the "End
of History" crowd and decided to invade and attempt to "remake" the Middle
East in that vein.

A
tragic irony of exporting "liberty" with force is the expansion of the acceptance
of its opposite doctrines. The same thing is happening to the Middle East as happened
in Seattle in
1999. As the globalization of capital spreads under the corrupt American system
of corporate-state
socialism, provoking enemies along the way, many of those in opposition focus
their blame on capitalism rather than the government intervention on behalf of
the private interests. Though bin Laden's network has investments in many legal
businesses, including honey, acacia trees (gum Arabic), real estate, shrimp and
fishing boats, dairy farms, and stocks, Napoleoni says that the the bin Laden
network's in-house "ideologist" Sayyid
Qutb's ideal society would abolish the "selfish individual" and end "exploitation
of man by man," etc. She quotes Iranian scholars (presumably Shia) as calling
the modern jihadist ideology "Leninism in Islamic robes." This perspective seems
confirmed when we observe their radical
tactics and the description of bin Laden by his partner, Ayman al-Zawahiri, ais
the "new Che Guevara."

In the final (at least economic) analysis, the "war
on terror" is a clash between economic systems for dominance, a struggle between
East and West that goes back to history
far removed from the minds of most Americans. The real question is, why does this
have to be a conflict? As Napoleoni points out in her book, the economies of both
"sides" are completely interdependent already. This already places us in a position
of mutual assured
destruction, whether so-called weapons of mass destruction enter the equation
or not.

It
is the aggressive policies
of our government that provoke our enemies and grant them credibility in the eyes
of the masses in their part of the world. A centralized communist "caliphate"
could never work and would never be accepted by the people of the Islamic world.
They probably wouldn't listen to the fundamentalist crazies at all if we treated
them the way we demand to be treated.